Is Dunnes Stores really facing liquidation and should its boss be reported to the Gardai for breaking NAMA lobbying rules?

In March 2012, it was reported on here that a NAMA developer, Holtglen won a case at the High Court against Dunnes Stores. Little was made of the case on here at the time, because Dunnes was merely ordered to fulfill its contract to pay €20.3m for its site in the the Ferrybank Shopping Centre in Kilkenny and the assumption here was the sum would be paid, Dunnes would occupy the site and trade as normal – it didn’t seem like a life-or-death position for the Irish retailing giant. But fast forward eight months, and the NAMA developer Holtglen, backed by NAMA, is seeking the winding up of Dunnes Stores for non-payment of the €20.3m judgment. Not only that, but RTE is reporting that a Dunnes “executive”, Margaret Heffernan has written to the NAMA chairman, Frank Daly and RTE today reports “in one letter, Ms Heffernan told Mr Daly it did not make sense for NAMA to seek the winding up of Dunnes Stores.” This looks suspiciously like lobbying to me, and if that is the case and if the contact doesn’t find exemption under NAMA’s rules, then NAMA is obliged to report the contact to An Garda Siochana.

Holtglen Limited, controlled by the McPhillips family from Kilkenny is itself insolvent and its loans relating to the Ferrybank Shopping Centre – pictured here – have been transferred to NAMA. In Dublin’s High Court today before Mr Justice Peter Kelly, Holtglen sought the winding up of Dunnes Stores and the case is set to be heard on 14th December 2012.

For its part, Dunnes claimed in court today that it was “robustly solvent” but according to RTE, “had not paid the debt amid concerns about the Ferrybank Shopping Centre in terms of its viability and planning issues” Given the judgment by Mr Justice Peter Kelly in March 2012, you might have doubts about this defence, and it seems that Judge Kelly today expressed the same doubts.

So how is Dunnes doing financially? It’s a private unlimited company, seemingly, and doesn’t publish accounts, though there seem to be separate limited companies for stores, and accounts are available for these. It employs 18,000 according to RTE today, 16,000 according to the Dunnes Stores website and 2,500 according to other sources. It has 116 stores in the (Republic of) Ireland, 23 stores in Northern Ireland, six in England, five in Scotland and five in Spain. The Belfast Telegraph reported in April 2011 that the company’s turnover was GBP 194.7m (€240m) and its pre-tax profit was GBP 28m (€35m) though other sources suggest the overall annual turnover is €3.8bn. The company focuses on the sale of food, clothing and furnishings and faces competition from all angles with M&S at the higher end, Tesco/Musgrave/Superquinn/Supervalu in the middle and Aldi/Lidl at the lower end. A history of the company is available here. You would not have thought that a €20.3m bill would have caused it any real issues and that is why the judgment reported on here in March 2012 didn’t receive more attention.

Frank Dunne (69) is the managing director and Margaret Heffernan (70) is variously reported in the media as its “second biggest shareholder”, “chief” and an “executive” and “director of textiles”. She is listed as one of two directors of the private unlimited company, Dunnes Stores, alongside Francis Dunne (Frank Dunne, 69). NAMA’s anti-lobbying rules are available here. According to NAMA, “it is an offence to attempt to lobby NAMA. An officer or Board member of NAMA is obliged to report any such attempt to a member of the Garda Síochána and failure to do so is itself an offence.” The view on here is that it is practically impossible to legally fall foul of NAMA’s anti-lobbying rules because of all its exemptions, but when NAMA was being defended in its gestation by then finance minister, the late Brian Lenihan, he said on 10th September 2009 “the [NAMA] Bill includes a specific provision to outlaw lobbying of NAMA in relation to any of its decisions. Only a borrower and his or her agents will be authorised to deal with NAMA. It will be an offence to influence the Agency in the course of its work”

NAMA was asked for comment on the matter but had not responded at time of writing.

UPDATE: 14th December, 2012. At the 11th hour, Dunnes paid the €21.6m to Holtglen and in practice NAMA. The case returned to the commercial court today where Judge Kelly was no mood to indulge Dunnes Stores liberties. The barrister for Dunnes Stores said that the company had intended no discourtesy to the Court. The Irish Times reports “Mr Justice Kelly said he was glad to hear counsel say that because, on one view, the failure to pay could be regarded as a challenge to the court’s authority.”

Not only that, but RTE is reporting that a Dunnes “executive”, Margaret Heffernan has written to the NAMA chairman, Frank Daly and RTE today reports “in one letter, Ms Heffernan told Mr Daly it did not make sense for NAMA to seek the winding up of Dunnes Stores.” This looks suspiciously like lobbying to me, and if that is the case and if the contact doesn’t find exemption under NAMA’s rules, then NAMA is obliged to report the contact to An Garda Siochana.

I think a pretty big exemption would include the CEO and the Chairman of Nama actually writing back to you. This was from the Irish Times:

In relying letters, Mr McDonagh insisted Dunnes must pay the €21.6 million to Holtglen before Nama will engage in any talks about the operation of the Ferrybank development. The fundamental issue was the “pesistent refusal” by Dunnes to pay, he said.

Nama chairman Frank Daly told Ms Heffernan in letters he did not agree the centre was not commercially viable. Dunnes’ failure as anchor tenant to fit out and open its anchor store had adversely affected the reputation of the centre and of Holtglen, he said.

I don’t know what a relying letter is, but I’m pretty sure you can rely on the fact that Ms Heffernan will not be subject to anti-lobbying proceedings.

I suppose when Frank Daly said that people should write to him with details of matters affecting Nama, he really meant it. He’ll even get back to you and everything.

@NWL
Company Reg NO IE317228 is Dunnes Stores (No limited after the name, as you have indicated), but it has a labyrinth of subsidiaries, most, as far as I can see, are limited companies.
I took a look one of these out of interest, DUNNES STORES (PARKWAY) LIMITED Number IE103443.Hmm…. Not exactly the kind of robustness one likes to see in a company, even a subsiidiary. Net Assets (Minus) €1,364,544 at Jan 29th, 2011, with ~9M in assets but liabilities of ~10million owed to “Dunnes Stores”, giving a negative net worth of ~1.3million.

But never mind. The company is in good hands. The auditors are Ernst and Young. Safe as a bank, probably.

The corporate limited liability structure is a wonderful thing indeed.

@ Eamonn As Dunnes have lost their Appeal at every level to date, I have no doubt it has been paid because serious interest would apply to such a bill and would accrue until it was paid.

As a point of information, it is of course not a tax, but a levy applied by the Dept. of the Environment, but collected on their behalf by the Revenue Commissioners and the appeal procedures are the normal ones applying to Revenue issues. Here is a link to the Regs. http://www.irishstatutebook.ie/2001/en/si/0605.html

I gather Margaret H nearly broke the revolving doors when leaving the Tax Office after a meeting about the original assessments. He poor advisors were left trailing in the distance as she disappeared in a fit of pique.

@eamonn NAMA is negotiating,curious that so far all the reporting has only focused on the 20 mil.
The development is rumored to have cost over 100,000,000 on the wrong side of the river outside Waterford !
The settlement amount will go some way towards allievating the loss here,but how about getting them to actually open and trade?
Without an anchor tenant this center will always struggle,Dunnes offered a number and surrender of the premises,if they are forced to pay the above they have every incentive to keep it dark and bury NAMA on this deal.
Extremely,surprised the High Court decision was not appealed.
If NAMA has a replacement anchor tenant or back up,they have had plenty time,cut a deal.Much more at stake here for the Irish Taxpayers than forcing DS to pay up.

Here is the link to that offer Dunnes made..
“Dunnes says it has to date paid some €18 million for the centre on foot of the 2007 agreement and has indicated in correspondence it will pay another €7.5 million and transfer its rights in the centre to Nama if that is accepted as the end of its obligations”

Often wonder does NAMA have any commercial accumun at all,of course Dunnes are hard to deal with.The business they are in is cut throat with razor thin margins,still they are a real Irish success story,major employer and yeah probably used to getting their own way.

If you had a back up tenant and after all is that not what real asset managers do,take the money get the center open and sell it.
Waste time energy and resources but makes NAMA look tough and distracts people,suing or litigation with DS is a failed strategy not a success story.

One could also wonder about the position of Dunnes Stores no matter ho ‘robust’ they claim themselves to be. A judgement for debt due is not something a trading company wants on the record usually, particularly if it makes use of credit from suppliers. Suppliers get nervous, not being familiar with the background. In that context it is most surprising that Dunnes did not move to settle the issue far sooner.

But there is one interesting point. The judgement is not recorded for “Dunnes Stores”. Perhaps it is recorded for a limited liability subsidiary, the subsidiary that signed the contract, but that would have little visibility for people who look these thinks up.

Appears to be “Dunnes Stores” all over that judgement,I would expected this transaction to have been conducted by a sub or LLC.
But it was funded by B of I some pretty decent sized amounts involved here,over 35 million still in dispute.A bit unlikely Holtglen got that 100 million w/o some guarantee from a Dunnes company with assets.
Why it was ever built is beyond me but that’s split milk at this stage,is NAMA a non regulated collections agency or an asset manager.?

Given the sheer scale and footprint of Dunnes,would it not make more sense for NAMA to take the long view.If i was at DS we would have our best leasing team reviewing ALL NAMA’d developers leases and obligations,looking to get extremely sporty with them.

If NAMA is say selling other assets with DS as anchor will cooperation really be forthcoming,this whole saga looks like an attempt to garner some positive PR for NAMA.

Dunnes I have no doubt can write this check,but make no mistake about it they will look to ‘catch’ NAMA down the road and even the score,at the expense of the Irish state and its taxpayers.In the meantime hows that 100 million center that NAMA is ‘asset managing’ doing,oh they litigating with the anchor tenant………very Irish !

@John Gallagher.
We will have to disagree on this one. If a debt judgement cannot be collected from a ‘robustly’ solvent company, then we are indeed in new territory.

In relation to reaction from Dunnes or getting ‘sporty’, the State has an obligation to defend its interests. That it has miserably in that regard when dealing with powerful forces is regrettable.

There is an old (horse) ploughing metaphor that NAMA would do well to recall.
It is called ‘Lowering the small wheel’, used when one wanted to plough deeper, or to contest an opponent more ‘robustly’, to borrow a word.

It is time for NAMA and the State generally to ‘Lower the small wheel’, when dealing with powerful forces both outside and inside the State.

@ Joseph agree to disagree here,the original developer is insolvent,broke,out the game.The fact that NAMA exits at all still confounds some people,are they a debt collection agency,a sleight of hand while state assets get stripped and sold at bargain basement prices?

Yes Dunne’s is a 500 pound gorilla but its an Irish one,sure Ben lost the plot in Florida….sorry i missed that trip myself :)
Whats NAMA going do with this money if it extracts it from Dunnes….retire some more bonds early….

Frank is a carer civil servant,Brendan too its fair to say most long term successful RE developers or asset managers would negotiate/work out a deal,last resort is call in the lawyers,its considered a failure in “partnerships”.
Does NAMA not have any big picture guys at all,there must another empty store,field,existing situation that NAMA and DS can work something out.

Successful,long term landlords view their anchor tenants as partners.

PS:Joseph i know you follow that Greek thing,one section that caught my attention was the ‘lock-boxing’ of proceeds from state asset sales….its near the top of the statement….. Ireland next ?

Best leave the Dunnes business as it probably is sub-judice at the moment and Dunnes have big pockets, whether they full or empty.

Re Greece.
I am just an interested bystander in most of those issues. By any measure Greece has been destroyed by it ‘partners’ in Europe, who would gladly dump Greece in the Aegean but have belatedly realised that the resulting tsunami would clear the Alps and cause a lot of destruction, for which the instigators of the dumping would be rightly blamed.
The lock box is a humiliating experience for Greece. But in relation to part of it at least (below) a similar 50/50 system was used in the Marhsall Plan, with the US putting up 50 for every 50 of national money contributed.
Hopefully there will be no lock box arrangement for Ireland, unless the first item into the lock box is the ELA money that was used to pay off the Anglo bondholders.
Greece should have given the two fingers to Schaeuble and the EZ.
If the EZ try to do to Ireland what they did to Greece, I would expect very ugly consequences.

I heard Shane Ross on the radio this evening, saying Ireland should kick like Greece to get concessions. He seems to blissfully unaware of the kind of humiliation, financial, political and emotional that the Troika have put Greece though.
We need to stand up for the country but Ross and everybody else should be aware that Ireland would be long left the EZ at this stage, if she had to endure what Greece was forced to do.

This episode of European history will reflect badly on Europe and Germany in particular. Bad enough to have a significant commercial impact.

@Joseph I wont hijack NWL’s excellent piece on the Dunne’s,his posts take a lot of work.The quality of writing and sourcing is not as easy as NWL makes it look.
I only mention Greece because the usual suspects will be clamoring for some sort of ‘deal’ on the PM’s for Ireland.Keep in mind the law of unintended consequences,will proceeds from state asset sales get lock boxed and not utilized for job creation,this was always a bit ‘muddled’ but that was my understanding.

I’m calling BS on this one,could never find it in any EU or troika document….so it still ‘may’ be 50%,i bet that gets ratcheted back to 100% and lock-boxed in return for throwing a drowning man a straw………

“The change now is that that will be significantly higher. It could be – I stress could be – as high as 50 per cent,” said Mr Kenny.”

@jG
“wrong side of river outside Waterford” i.e. K-CoCo planning in Newrath – how this was ever going to be viable with new (now built) N25 bypass was ‘imaginable’ even back then. Well done K-CoCo planners, Dunne’s for not looking at the population stats, and the banks for backing them – ultimate stupidity. It was ridiculous from the off, one Co.Co. trying to extract rates from another City Co. and all falling into the bandwagon. A well know retailer was kicked out of a W Co.Co site on the opposing edge of W City Co. relatively recently (via courts), essentially for taking custom out of City Co.
If Dunnes cannot pay, they will fall. Harsh but reality.